2018 (12) TMI 291 - HC - Income Tax

Estimation of bus income - Held that - Pertaining to the assessee s son both as an HUF and as an individual. The Tribunal has taken note of the age of the bus as well as the reasons given by the Assessing Officer for the assessment year 1984-85 and fixed the expenditure at ₹ 14,100/- per month for all the three assessment years, which were under consideration in the assessee s son s case. In our considered view, the reasons assigned by the Tribunal are just and fair and that there is a clear method followed by the Tribunal for computing the expenses per bus per month. Thus, the Tribunal ought to have adopted the same method in the assessee s case also and there is no reason given by the Tribunal to take a different view. Accordingly, we answer substantial question of law No.1 in all the appeals in favour of the assessee and against the Revenue. We direct the Assessing Officer to first compute the expenditure by adopting the computation done in the assessee s son s case. Telescoping of the credits - Held that - The Tribunal found that the plea of the assessee for telescoping of the credits to the extent of income added in the business account is reasonable and accordingly, restricted the income to the extent it could not be telescoped with the addition made on account of income from business. We find that the Revenue has not been able to point out before us as to why a similar relief should not be granted in the assessee s case also. Share income/loss from transport business in the bigger HUF and from the business of provisions stores in the name and style of Dhanapal Maligai (smaller HUF) - assessee offered the income in the HUF. However, the Assessing Officer held that it should be assessed in the hands of the individual - Held that - We find that the Assessing Officer has actually recorded a finding that the assessee became a partner of Dhanapal Maligai, that the capital was ₹ 30,000/- as on 30.6.1986 and ₹ 3.5 lakhs as on 30.6.1987 and that the investment in the firm has not been made out of the HUF funds and there had been no detriment of HUF funds. He further held that the share from Dhanapal Maligai would arise for consideration only in the hands of the individual. With regard to the share income from the transport business, which was brought by the assessee in the bigger HUF, the AO held that the income derived from the bus said to be belonging to HUF is assessable in the hands of the individual and completed the assessment. The factual findings rendered by the Assessing Officer as confirmed by the CIT (A) as well as the Tribunal do not call for interference, as we find that there is no perversity in the same - Decided in favour of revenue

Summary

Issues:
- Interpretation of Income Tax Act, 1961 regarding expenditure allowance for bus operation and share income assessment.
- Telescoping of credits in capital account for arriving at net income.
- Assessment of share income from business in HUF vs. individual hands.

Interpretation of Income Tax Act:
The appeals involved a dispute regarding the interpretation of the Income Tax Act, 1961, specifically related to the allowance of expenditure for bus operation and the assessment of share income. The Tribunal's order was challenged by the appellants, arguing that the Tribunal failed to consider its earlier decision in a similar case involving the appellant's son. The main contention was that the Tribunal should have adopted the same method used in the son's case for computing expenses per bus per month. The High Court agreed with the appellants, directing the Assessing Officer to compute the expenditure based on the method used in the son's case.

Telescoping of Credits in Capital Account:
Another issue raised was whether the credits in the capital account offered as business income should be telescoped to arrive at the net income, thereby avoiding double addition under the head 'business.' The High Court referred to a previous decision involving the appellant's son, where the Tribunal allowed telescoping of credits to the extent of income added in the business account. The Court found this approach reasonable and directed the Assessing Officer to restrict the income to the extent it could not be telescoped with the addition made on account of income from business.

Assessment of Share Income:
The final issue concerned the assessment of share income from the transport business and a provisions store in the name of Dhanapal Maligai in the context of Hindu Undivided Family (HUF) vs. individual assessment. The Assessing Officer had held that the income should be assessed in the hands of the individual rather than the HUF. The High Court reviewed the findings and upheld the assessment, stating that the share income from the transport business and provisions store should be assessed in the hands of the individual, not the HUF. Consequently, the Court decided against the appellants on this issue.

In conclusion, the High Court partially allowed the tax case appeals, directing the Assessing Officer to compute expenditure based on the son's case method, restrict income by telescoping credits, and affirming the assessment of share income in individual hands.